On February 21, 2021, the Zillow Group stock market graphic appears on your smartphone with the Zillow logo in the background.
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Jiro Shares plunged more than 9% on Monday on concerns that the online real estate platform will have a new big competitor, Google Search.
google appears to be conducting a test to include real estate properties for sale in search results. Over the weekend, real estate tech strategist Mike Delpreto shared a screenshot from his phone of Google search results showing real estate listings that appeared to be provided by real estate data company House Canary. This listing allows users to view property page details, request a tour, and contact an agent, similar to the features provided on Zillow.com’s online marketplace portal. Google’s Home Search is currently undergoing testing and appears to only work in some markets and on mobile devices.
Zillow’s decline shows investors are bracing for the eventual impact of Google’s move into the real estate market. The company’s stock price fell more than 11% at one point during Monday trading, wiping out about $1.6 billion in market capitalization. Zillow’s market capitalization currently stands at approximately $16.26 billion.
But Wall Street analysts were quick to point out that Zillow’s exposure to organic search is fairly small, limiting potential downside, at least in the short term, as more details about Google’s products emerge.
Wells Fargo analyst Alec Blondolo, who has a comparable rating for Zillow, said that given that Zillow does not rely heavily on organic search results for traffic, “we do not expect a material financial impact from the transition of Google listings from organic to paid.”
“This listing product appears to be similar to Google’s hotel metasearch results,” Blondolo said in a note to clients on Monday. “While implementation may increase the cost of traffic to Zillow, it is unlikely to eliminate intermediaries.” “In the hotel category, Google is commercializing hotel rooms in search results as a metasearch ad product for OTAs. We expect a similar approach in real estate. Rather than Google trying to directly monetize the ad products it sells to agents, Zillow, Homes.com, Realtor.com, and others will bid on residential listing ad units.”
Zillow stock over the past year.
But some analysts see Google’s test as a long-term headwind for Zillow and other online real estate portals.
Goldman Sachs’ Michael Ng wrote in a note to clients that he believes the search engine’s real estate listings are an advertising format for buy-side agents that compete directly with Zillow’s Premier Agent program in “facilitating lead generation” for agents from prospective buyers.
“While we do not expect a direct short-term impact on Zillow’s business given that most of Zillow’s traffic is direct (Zillow.com, StreetEasy.com, mobile apps, etc.) and Google’s new products are currently limited to select markets and mobile browsers, we do see this development as a long-term risk for real estate portals like Zillow,” Ng, who remains neutral on Zillow, said in a note to clients.
Oppenheimer’s Jason Helfstein said Google’s expansion into real estate could impact the number of consumers accessing Zillow.com (which was 228 million in the third quarter) and therefore hurt the company’s ability to monetize its platform. “It will likely take years to see any impact, and it will likely need to be rolled out across the United States to have a meaningful impact on real estate portal traffic,” Helfstein said in a recent memo.
Zillow stock is down more than 8% since the beginning of the year.
Neither Google nor Zillow immediately responded to CNBC’s requests for comment.
